Monday, August 13, 2018

Blue Apron Is In The Red

Over the last several weeks, I've been a pretty big fan of Blue Apron, the meal kit delivery company that has been the source behind my "Expectation VS Reality" posts. Despite my rousing endorsements, Blue Apron's stock has been in free fall recently. As of this writing, the stock is trading for around $2.20 per share, which is a huge drop from its 52 week high of $6.25 and very near is 52 week low of $1.72. So, what's happening? The meal kit market, which is fad based to begin with, has become heavily competitive. Hello Fresh recently surpassed Blue Apron as the market's biggest meal kit delivery company. Also, grocery stores like Wal-Mart and Whole Foods are looking into providing their own meal kits at a fraction of the price. The other issue is customer retention

So, what can Blue Apron do to turn this situation around? I have a few ideas:

Offer some cheaper kits: Most Blue Apron kits are priced at around $11 per serving with a minimum of 2 servings per kit. Cheaper alternatives are hitting the market and Blue Apron needs to pay attention. Blue Apron could easily provided cheaper, less complicated kits for around $6 per serving in addition to their usual kits.

Enter Into Strategic Alliances: Blue Apron has already teamed with Costco in a pilot program to provided Blue Apron meal kits at select Costco stores. Blue Apron needs to expand on this partnership and possibly enter into similar partnerships with other grocery stores.

Focus on Customer Satisfaction: Customer retention is a huge issue. Blue Apron spends quite a bit of marketing in order to gain customers, but only 15% of those customers end up sticking around. My own experience is that on-time delivery is unreliable and variety is somewhat lacking. But, whatever the reason why Blue Apron is bleeding customers, they need to address it ASAP.

Lose The Weekly Subscription Requirement: Blue Apron has recently allowed its customers to refrain from committing to a weekly subscription and just order kits on an as needed basis. Personally, this is what made me return to Blue Apron. In order to encourage subscriptions, perhaps Blue Apron could offer some sort of monthly incentive if a customer successfully took 4 weeks of delivery.